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Saturday, 18 July 2009

Islamic banking less exposed to meltdown

Dhaka, Jul 17 (bdnews24.com)—Islamic banking is less exposed to risks like the global financial crisis as it is not based on predictions but on profit or loss sharing, a visiting top Sharjah Islamic Bank official says.

By definition, it cannot guarantee any interest or fixed rate of return on deposits like the conventional banking system, Ibrahim Iqbal Karmally, the head of trade finance for the Sharjah Islamic Bank, told bdnews24.com on Friday.

Karmally is visiting Dhaka to conduct a workshop on 'International Trade payment: Islamic Trade Finance' organised by the International Chamber of Commerce, Bangladesh.

The workshop was held on Friday at the city's China-Bangladesh Friendship Conference Centre.

"But basically, it is not away from the concept of return (interest ) to your clients," Karmally said, after the inaugural session.

Asked on the prospects of Islamic banking, he said that system is not based on predictions which gives it the advantage to less external shocks like the recent financial meltdown.

"The total GDP of the world is around $ 30 trillion where as the total credit market is $ 64 trillion. This gap is prediction."

Islamic banking is gaining popularity across the world as the global financial turmoil seems to have had limited impact on it, Mahbubur Rahman, ICCB president said at the launch of the workshop.

"Even the Vatican says banks should look at the rules of Islamic finance to restore confidence among their clients at the time of global economic crisis."

Islamic finance industry has been in an expansionary phase in recent years, banker Mamun Rashid told the audience.

"In fact, there is currently over $ 800 billion worth of deposits and investments lodged in Islamic banks, mutual funds, insurance schemes and Islamic wings of conventional banks.

Over 60 participants from 22 banks are attending the workshop designed to provide understandings of the Islamic international trade financing and the risks associated in the trade structure framework.

The Islamic banking industry started in the country back in 1983. Currently, of the 48 banks, six commercial banks run fully fledged Islamic banking.

In addition, 21 branches of 10 conventional banks are engaged in Islamic banking, according to central bank figures.